Have a Tax Question? Ask a Tax Expert
Hi and welcome to our site!In general - your referral fees are considered self-employment income.In most situation the contract specifies a percentage of your pay based on the total contract for specific time period. For instance - your fees might be 50% of the contract for the first month and 10% thereafter.There might be additional obligations of parties.For federal tax purposes - you will report all business income and expenses - on the schedule C -http://www.irs.gov/pub/irs-pdf/f1040sc.pdfThe net income (after deductions)will be reported on the form 1040 line 12 - http://www.irs.gov/pub/irs-pdf/f1040.pdfIf the business has net income over $400, it may be required to file Schedule SE, Self-Employment Tax and net income is likely self-employment income and 15.3% self-employment tax would be required.Self-employment taxes from schedule SE will go to the form 1040 line 56 - http://www.irs.gov/pub/irs-pdf/f1040.pdf Also - you will deduct half of self-employment taxes on the line 27. Generally - that all you needs for income tax purposes . Please review all possible deductions - that might help to reduce income tax liability.
Here are sample contracts you may use as a prototype - and adjust for your needshttp://www.stcrmc.org/assets/Meetings/Referral20and20Non-Circumvent.pdfhttp://www.startupbiz.com/wp-content/uploads/2013/04/Finders-fee-Referral-Agreement.pdfhttp://www.rocketlawyer.com/document/referral-fee-agreement.rl
I have housekeeping referrals.. It is difficult to figure out the percentage. Can I put a certain amount for each referral, for ex., 25 dollars
Yes - you may specify a certain amount - if both parties agree - that is not an issue.
how can I specify that it is one time referral. They are not supposed to use it if they need it the second time..
That will be in your contract between you and housekeeping provider. You may specify additional fees for violation of contract terms. There is no strict rules - as long as both parties agree - that is OK.
Please see here examples for referral fees - http://allpromaidservices.com/referral-finders-fee-2/
Do I need to register myself or I can work as an individual and just pay additional income fees?
You are not required to have any registration.But if you want to create a separate business entity - you may for instance register the LLC.If you just started - I suggest to keep things as simple as possible.
If you will earn larger amounts - and your tax liability will be more than $1000 - you might need to pay estimate taxes. Estimated tax is the method used to pay tax on income that is not subject to withholding.
Can I send all this information to my e-mail please
In this case - you should use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax. For additional information on filing for a sole proprietor refer to Publication 505, Tax Withholding and Estimated Tax.
Have a good day!!!
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